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Holly Hill Acres, Ltd. (holly Hill)

Essay by   •  March 22, 2013  •  Case Study  •  415 Words (2 Pages)  •  1,511 Views

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Holly Hill Acres, Ltd. (Holly Hill), purchased land from Rogers and Blythe. Holly Hill gave Rogers and Blythe a promissory note and purchase money mortgage. The note stated that "the note with interest is secured by a mortgage on real estate made by the maker in favor of said payee. The terms of said mortgage are by reference made a part hereof." Rogers and Blythe assigned the note and mortgage to Charter Bank of Gainesville (Charter Bank) as security and obtain a loan. After a few month Rogers and Blythe defaulted on their loan with Charter Bank. Charter Bank sued to recover on Holly Hill's note and mortgage.

The reference of the mortgage in this case made the agreement nonnegotiable. "Nonnegotiable contract is a contract that fails to meet the requirements of a negotiable instrument and, therefore, is not subject to the provisions of UCC Article 3."

This agreement made a reference to another agreement which made the agreement nonnegotiable. "To qualify as a negotiable instrument, a document must meet certain requirements established by Article 3 of the Uniform Commercial Code (UCC). If these requirements are met, a transferee who qualifies as a holder in due course (HDC) takes the instrument free of many defenses that can be asserted against the original payee. In addition, the document is considered an ordinary contract that is subject to contract law." According to the UCC (Uniform Commercial Code) (Section3-104) a "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it:-

* is payable to bearer or to order at the time it is issued or first comes into possession of a holder

* is payable on demand or at a definite time; and

* does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) a waiver of the benefit of any law intended for the advantage or protection of an obligor."

Since Blythe and Rogers has handed over the rights to the promissory notes to Charter Bank, Charter Bank can seek legal action to acquire the money from Holly Acres.

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